Apex Court Blow To Cronyism

October 18, 2012

The 5-judge constitutional bench, in its advisory ruling on the 2G presidential reference, has done exactly what was asked of it. It has clarified matters, and ensured that in the future, Governments – both present and future - know exactly where it stands on both issues – allocation of scarce natural resources and Supreme Court’s powers to interfere with Government policy. In reality, and in sharp contrast to the spin from certain Government sources, the brilliant 208-page ruling will make it virtually impossible for Governments to abuse its discretionary powers in the manner it has been accused of - both in the 2G and Coalgate scams.

SC Ruling improves on auctions

Government’s entire fight against the 2G Judgment was on account of the fact that its hands were tied, and that somehow, the 2G Judgment had made it impossible to carry out its executive decision making. This argument was then extended to accuse the courts of interfering with executive powers of policy making. At a time when the Government should have been addressing issues of serious corruption, malafide and procedural violation – which resulted in illegal profits for private companies, the Government pretended that it was paralyzed, hurt and rendered ineffective because the 2G Judgment had tied its hands.

The Supreme Court’s ruling has trashed that argument in no uncertain terms. In Paras 75, 80 and 81, the apex court has clarified that the 2G Judgment does not make a mention that auctions is the only permissible method for disposal of natural resources, and further, the 2G case does not even deal with the modes of allocation of natural resources other than spectrum. So in effect, the 2G Judgment neither inserted any lack of clarity in decision making, nor can it be held responsible for the complete paralysis that has occurred since February 2012.

The second not-so-innocuous objective of the Government was to keep its discretionary powers alive. If the Court somehow ruled that auctions were not the only way to allocate resources, then the old regime could continue and deals could be struck behind closed doors because First Come First Served, lotteries, beauty parades and screening committee-based approval of applications – as in the case of Coalgate – would all be back in the reckoning.

The Court, in a savvy ruling, has opined that auction is certainly not a constitutional mandate. The truth, however, is that the ruling makes it virtually impossible for the Government to consider any other process for allocation of scarce, natural resources, except an open, transparent, competitive bidding, or in other words, auction by any other name except auction.

The language that must now be tested for allocation of all scarce, natural resources and could become the basis of allocation of Government contracts/licensing is perhaps the biggest service that the Supreme Court has done to this nation and its people in removing corruption in high places. The Court has ruled that such allocations must pass the test of being “fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favoritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. It should conform to norms which are rational, informed by reasons and guided by public interest etc. All these principles are inherent in the fundamental concept of Article 14”.

This language essentially means that the process of allocating scarce natural resources will be virtually free of corruption and misuse of discretionary powers. Also, it allows aggrieved parties and those using PILs to oppose corruption, to strike down any allocation, even if it’s a manipulated auction, to stop crony capitalism. Discretionary powers have been dealt a serious blow.

Illegalities in the name of policy will not be tolerated

The second attempt by the Government’s handlers was an attempt at keeping courts out of government’s policy decisions. Here again, the Government has got an answer that it least expected. The Court has brilliantly responded by ruling that it is the legislature and executive that are answerable to the Constitution, and it is there where the judiciary, the guardian of the Constitution, must find the contours of the powers of disposal of natural resources, especially Article 14 and 39(b). The Court has ruled that the policy making powers remain with the Government. It, however, comes with a strong caveat, which allows courts full powers to evaluate any policy where disposal of natural resources is concerned. Courts can even interfere on a case-by-case basis where it observes that the judicial scrutiny of methods of disposal of natural resources should depend on facts and circumstances of each case, in line with the principles stated in the ruling,“failing which, the Court, in exercise of power of judicial review, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution“. It says that in the event the policy or even law is patently unfair to the extent that it falls foul of fairness requirement of Article 14 of the Constitution, “the Court will not hesitate in striking it down”.

There are several other important portions in the Ruling delivered by Justice J.S. Khehar, which further ties Government’s hands by stating that no part of natural resources can be dissipated as a matter of largess, charity, donation or endowment for private exploitation. It states, “one set of citizens cannot prosper at the cost of another set of citizens, for that would not be fair or reasonable.”

In the final analysis, this Ruling of the Supreme Court which was intended to give Government breathing space on the 2G and Coalgate scams, has done exactly the reverse. It has left those two scams completely untouched. Secondly, it has made the process of allocation far tougher than auctions, since now, even auctions, if manipulated, can be tested against the language mentioned in this advisory ruling.

Finally, the Government has absolutely no escape from judicial scrutiny – it can make any policy it wants, but should know that the Court has retained full powers to test that policy against laid-down parameters and strike down any decision or policy of the Government. Just as Dr. Ambedkar and the founding fathers of our Constitution intended, the Supreme Court has shown that there will be checks and balances, and therefore, accountability in our country.

Ignore the spin from the government spin masters. Life for Governments and businesses will never be the same again. The old days of gaming the system are over and there is a new world of transparency, fairness and disclosure that they will need to adapt to and we have the CAG and Supreme Court to thank for it.

This article appeared in the New Indian Express on October 18th, 2012

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